Following the widespread destruction caused by “Superstorm Sandy,” the governors of New York and New Jersey declared states of emergency and issued numerous emergency executive orders and directives. Some of these orders have a direct impact on the ability of policyholders to recover their losses, while others may trigger special coverages or relax certain requirements that generally apply to the claims handling process. Included below are summaries of the salient orders and directives. We encourage policyholders to remain abreast of developments as the recovery process moves forward.
Government officials are sending a clear message to the insurance industry that it should not try to find ways to avoid coverage. New York’s Department of Financial Services, which regulates the insurance industry, has issued a number of directives and orders that may impact insurance recovery for Superstorm Sandy claims.
UPDATE: New York's government officials are also continuing to advocate on behalf of the state's municipal governments, public agencies, nonprofits, individuals and businesses for federal disaster assistance. At their request, FEMA recently extended the deadline to apply for assistance from December 31, 2012 to January 28, 2013. Registration may be accomplished online, at www.disasterassistance.gov, via smartphone or tablet at m.fema.gov, or via phone at (800) 621-3362 (available 24 hours per day, seven days per week until further notice).
On October 31, 2012, Governor Cuomo’s office announced that homeowners would not have to pay hurricane deductibles because Sandy did not feature hurricane-force winds at the time it made landfall. Policyholders should review the specific terms of their policy relating to hurricanes, windstorms, and similar causes of loss to determine the appropriate deductible. In a follow-up announcement on November 5, 2012, the governor’s office announced that most insurers had agreed not to apply hurricane deductibles.
On November 5, 2012, the Superintendent of the Department of Financial Services instructed insurers to accept video, photo, and other documentation of damage so that cleanup could begin without waiting for an adjuster to visit the site of the loss. On the same day, Governor Cuomo issued Executive Order No. 63, which declared that storm debris posed a public nuisance and needed to be promptly removed by local officials. Given that, policyholders can move forward with mitigating their losses by cleaning up and disposing of damaged property. However, it is important to carefully document mitigation efforts, with particular emphasis on taking photographs of any damaged property.
On November 29, 2012, Governor Cuomo announced two new initiatives intended to expedite insurance settlements. First, he directed the Department of Financial Services to issue a new regulation requiring insurers to dispatch a claim investigator within six days instead of the former 15-day requirement. The new regulation also provides that claimants may commence immediate repairs to property necessary to protect health and safety, such as heat and hot water, electrical systems, and exterior windows and doors, and minor repairs to exterior walls to the extent necessary to maintain heat.
In addition, Governor Cuomo issued Executive Order No. 82, providing that temporary licenses may be issued to adjusters not licensed in New York, provided the adjuster is supervised by a duly licensed adjuster, along with certain other requirements. This too is aimed at reducing the time required for policyholders to receive insurance proceeds.
Executive Order No. 52 tolls most statutes of limitations that would have otherwise run on or after October 26, 2012, the date of the declaration of a disaster emergency. While this order is not likely to have a direct impact on insurance claims arising from Sandy, policyholders should be aware of it and cite it if their policies contain restrictive and/or short deadlines for filing sworn proofs of loss.
New Jersey also has issued a number of executive orders intended to aid policyholders. All these orders have originated from the governor’s office. On a prospective basis, New Jersey’s Department of Banking and Insurance is likely to assume a greater role in managing the aftermath of the storm and the high volume of insurance claims filed.
UPDATE (January 14, 2013): In response to widespread confusion among homeowners regarding their insurance coverage for Superstorm Sandy losses, the New Jersey legislature is considering a bill that would require a one-page summary to be attached to each policy. The proposed summary would alert homeowners to the possible application of hurricane and similar deductibles, the lack of coverage for flood losses, and possibly other topics.
UPDATE (January 9, 2013): New Jersey public officials are continuing their efforts to aid policyholders in their Superstorm Sandy recovery efforts. The New Jersey Department of Banking and Insurance recently issued Bulletin No. 12-16, reminding public adjusters that the fees charged to policyholders must be "reasonably related to the services rendered," and that public adjusters must document their efforts sufficient to "demonstrate this relationship upon inquiry by the Department." The Bulletin also advises that "[t]he Department does not anticipate that public adjusters will need to increase their normal fees due to Superstorm Sandy." The Department's Bulletin can be found here.
UPDATE (December 20, 2012): Due to continuing high demand, FEMA has since extended the deadline again, to January 30, 2013. Along with municipal governments, public agencies, and non-profits, individuals and businesses may register online at www.disasterassistance.gov, via smartphone or tablet at m.fema.gov, or via phone at (800) 621-3362 (available 24 hours per day, seven days per week until further notice).
Executive Order No. 104 declares a state of emergency. Of particular interest to policyholders, the order authorizes various local officials to (i) create traffic detours; (ii) prevent the ingress and egress of traffic to any location; (iii) order the evacuation of any location where the presence of persons may pose a danger to their health, safety, or welfare; and (iv) suspend, waive, or modify any rule, the enforcement of which could be detrimental to public welfare during the emergency. Policyholders who were unable to access their property or unable to engage in critical operations as a result of authority exercised pursuant to this order may have claims under their first-party property policies by invoking “civil authority” or related types of coverages.
Executive Order No. 106 declares that a state of water emergency exists and authorizes the Department of Environmental Protection to take all necessary steps to alleviate the emergency, including (i) imposing use restrictions and conservation measures; and (ii) establishing priorities for distribution of the state’s water supply. Compliance with the order and with the resulting restrictions imposed by the DEP is mandatory for all persons and businesses. Policyholders whose operations were curtailed, halted completely, or otherwise affected by such restrictions may be able to recover under their business interruption or other “time element” coverages.
Executive Order No. 107 provides that because Sandy was categorized by the National Weather Service “as a post-tropical storm, it shall be a violation of [the New Jersey Administrative Code] for any insurer to apply a mandatory or optional hurricane deductible.” It also directs insurers to “exercise appropriate forbearances on collection, cancellation, documentation . . . due dates for claim filings, premium and loan payments and late fees.”
We understand that Order No. 107 may be modified to clarify that (a) it applies to both personal and commercial insurance policies; and (b) the prohibition on applying hurricane deductibles extends to “named storm deductibles” and/or “weather catastrophe occurrence deductibles.”
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The Lowenstein Sandler Insurance Practice Group will continue to monitor the orders issued by New York and New Jersey officials and will update this Alert on its webpage as new information becomes available. We therefore invite you to visit our Superstorm Sandy and Mass Disaster Insurance Coverage webpage for updates.